IRS Delays, Questions Nonprofit Status of News Organizations

The Internal Revenue Service is eyeing news organizations claiming nonprofit status, the Columbia Journalism Review (itself a nonprofit) is reporting.

There are 26 different categories, including “fostering national or international amateur sports competition,” that are eligible for the IRS’ 501(c)(3) nonprofit status, but none specifically covering journalism. Many other organizations, such as Mother Jones, National Public Radio, and, locally, the Voice of San Diego have successfully applied under a clause permitting “the instruction of the public on subjects useful to individuals and beneficial to the community.” Even James O’Keefe, the controversial conservative activist whose secret filming of ACORN employees caused the collapse of the organization, has successfully obtained tax-exempt status.

As the newspaper industry’s traditionally massive advertising streams have declined with the rise of the internet, journalism budgets have suffered. The idea of nonprofit news sources seeking tax-deductible donations has emerged as a model to fund smaller news organizations.

The IRS is pushing back, though, delaying the applications of new news sources such as the San Francisco Public Press and New Orleans’ The Lens, both of which have been told their applications are being bundled with others and considered precedential.

Thirty years ago, the IRS first tried to challenge the nonprofit status of Mother Jones on the basis that it accepted advertising and subscription requests much like other magazines. They eventually ended their challenge but did not establish a precedent for what types of news outlets did or did not qualify as 501(c)(3)s.

The distinction remains blurred. San Francisco Public Press operates entirely on donations and a staff of volunteers but has been waiting over two years for its review; Voice of San Diego, meanwhile, features advertising on its site.

The Nonprofit Quarterly provides several speculative ideas on how things could end up. The IRS could provide guidance to prospective nonprofits on how to make their content more “educational,” in order to comply with the guidelines as written. Or Congress could add a 27th category of 501(c)(3) eligibility that would include news organizations. Until the issue is resolved, Nonprofit Quarterly expresses concern about the implications of a ruling more restrictive than in the past causing hesitation among present or potential donors to the organizations.